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Businesses need key parameters

All managers need to monitor certain key indicators that tell them if their
business is meeting their goals, and if it is moving in the right direction
for the future.

Dairy practitioners have widely divergent goals, so it is difficult to
identify a list of key parameters that are appropriate for every practice.
However, profit is needed in almost every situation if the business is going
to continue, and a stable or expanding client base is also crucial.

The following items are ones that I think every owner or manager should
track at least monthly. I have suggested some goals that were appropriate
for me when I was in practice, but your own numbers may differ dramatically.
The initial value is less important than how it moves in the future. Knowing
this information will help you know where your practice is headed, and allow
you to make decisions to alter that course if needed.

Gross variables

1. Gross income per doctor per day: The actual number will vary
a great deal among successful practices, depending on the level of dispensing
that is done. My goal was $1,000 a day, with roughly one-fourth comprising
dispensing or lab fees and the rest service.

Suggested goal: $1,000 gross income per doctor per day.

How many hours?

2. Billable hours per day: To know this number, you must identify
an hourly rate for your time. In most cases, using this rate as the basis
for charging is the best way to bill for your service, but in any case it
is needed to determine your billable hours. Take your daily service income
and divide it by your rate, and you will see how many billable hours you
generated that day. This is essentially a measure of your productivity.
Do not include weekends or holidays, unless you strive to work a full day
on those occasions. Personally, I like to see very low numbers on those
days.

Suggested goal: Six to seven billable hours per doctor per day.

Tracking total hours

3. Percent billable hours: While total billable hours measures
productivity, the percent of total hours worked measures efficiency. You
want to generate high billable hours by being efficient with your time,
not by working long days. To know this figure, you need to know how many
total hours you worked. Include driving time, truck stocking time, telephone
time, and desk cleaning time -in short, all working time.

Suggested goal: 65 percent of total hours worked.

Production medicine cost

4. Percent production medicine: This value will differ substantially
from doctor to doctor, and from practice to practice. The initial value
is less important than the trend it follows. I believe the most secure practices
are those that provide both production medicine and sick animal services.
Those that provide mostly one or the other are more susceptible to changes
in client philosophy and the overall dairy economy.

A challenge with this measurement is defining what constitutes production
medicine. My answer is that production medicine services are those that
impact herd management vs. individual animal management. In general, reproductive
exams are not production medicine, as the results of a palpation usually
impact that cow, but not overall management. The same principle applies
to sick animals, surgeries, dehorning, etc. By contrast, record review,
discussions of timed insemination programs, ration balancing, milking equipment
evaluation and housing discussions impact the entire herd, and fall under
production medicine.

Suggested goal: 20 ­ 50 percent production medicine.

Sustainable clients

5. Percent of net from sustainable clients: This will be kind
of a "soft" number. To derive it, you will need to look over your
client list and make a judgment call about their future. Then make a realistic
estimate of the percentage of their gross billings that represents profit.
You can then build a spreadsheet that would track this number on a regular
basis.

Suggested goal: 80 percent of net income from sustainable clients.

Practice mission

6. Is the practice mission being fulfilled? Obviously this is
not a parameter that uses hard numbers, but rather causes you to step back
and ask yourself if the overall strategy is working. If the first five parameters
are right on, but you are frustrated and tired, then changes are due.

Many of you will take exception to both the indicators I listed, or the
values I suggested. That is a good thing. It is important to identify a
few key measurements that will tell you if you are meeting your goals, or
moving in the right direction. They should be important to you, and relatively
easy to monitor on an ongoing basis. You should set-up programs that will
give you these numbers consistently each month. Your billing forms may need
to be modified to make this easier.

Of course it does little good to produce the numbers if you do not
use them to make changes. If your percent billable hours is low, then determine
where you are wasting time or giving service away. If production medicine
is non-existent, find a way to get some programs started.

Know your business

The goal is to give yourself the means to know what is happening in
your business and to make adjusments in a timely manner, rather than being
vaguely aware that things are not as they should be, and eventually having
to lay off staff, move or do work you do not enjoy.